Most people in the US have always been interested in knowing about ways that can improve their finances but very few are consistent enough in following them so that they can ultimately get the best results. Like most people, you must have also made some serious money and credit card mistakes that have landed you in massive high interest unsecured debt. If you’re someone who has acquired more than 4 cards after your graduation and they were all maxed out within a year, you probably need to stop and get financial help. Debt consolidation is the answer to all your financial woes, whether you’re a student or an adult or even a senior.
Irrespective of the way in which you’ve amassed piles of debt on all your credit cards, often debt experts have seen that debt consolidation is the most sought-after debt relief option in the US. The Americans are reckless spenders and most of them who are up to their eyeballs in debt, are even oblivious of the ways they must resort to come out of it. This financial ignorance accounts for the rise in the number of credit card defaults in this nation. There are both good and bad ways of coming out of debt. Interestingly, you need to assess your personal finances and then decide which option is tailored to meet your personal financial needs. Some strategies that may seem logical apparently may knock a few points off your credit score and hurt you in the long run. It is always wise to avoid such hazardous mistakes and lead a debt free life.
Mistake No. 1: Enrolling yourself with scam artists for consolidating your debts
The effect and solution: With the abundance of the debt relief companies in the American market, there are also scam artists that are simultaneously working to dupe the financially stressed consumers. Scam artists will promise to negotiate with your creditors and pay off your debts within a short span of time. If you hear something that sounds too good to be true, beware. They will ask you to pay high fees for negotiation and then probably run away with your money. The probable solution to this problem would be verifying the accreditation of the company before signing up. Check whether or not it is registered with the BBB.
Mistake No. 2: Playing with the introductory rate game on balance transfers
The effect and the solution: You must be aware of the balance transfer method as a debt consolidation option. Don’t you just love coming across those 0% offers on the low rate cards? Have you ever tried to know what’s within such low rates? Well, these rates will be offered for a particular time which is known as the introductory period. Just after the completion of this period, you will be subject to outrageously high rates that may take a toll on your financial life. Avoid this by reading the fine print carefully and transferring your entire high interest balance within the stipulated time.
Mistake No. 3: Using a home equity loan to consolidate unsecured debts
The effect and solution: When the real estate prices were on the rise, many people started paying off their credit card debts with the proceeds of a home equity loan. Desperate debtors often forget that their house is kept as collateral and failure to make timely payments may even lead to a foreclosure. Therefore, only resort to this option when you’re sure about your payment affordability to save your home off the chopping block.
Mistake No. 4: Signing up with a for-profit credit counseling agency
The effect and solution: While you’re cringing to save money and pay off your debts, it is foolishness to sign up with a for-profit credit counseling agency that will make money while you’re repaying your creditors. You will unnecessarily lose a huge amount of your bucks in this process. Instead, you may resort to a non-profit credit counseling agency that is registered with the NFCC (National Foundation for Credit Counseling). They will offer you DMP plans and money management classes.
Staying afloat in such tough economic environment can be a daunting task. Avoid committing any further ‘get-out-of-debt’ mistakes that can depreciate your already fragile financial situation. Go for debt consolidation and boost your credit score in the process.